President-elect Donald Trump is following through on his threat to levy 25% tariffs against Mexico and Canada after they failed to meet his demands to stop drugs and illegal immigrants from entering the United States.
Despite early cooperation from both neighboring countries to try and appease Trump, who made the threat to establish the tax on imports before he returned to the White House, his administration hasn’t been satisfied with the actions Mexico and Canada have taken.
White House press secretary Karoline Leavitt also announced Friday that there would also be a 10% tariff on all goods from China, and the tax on all three countries would go into effect on Feb. 1.
On Monday at an address to House Republicans, Trump outlined specific items that his administration would tax, rather than a blanket tariff. Those items include pharmaceuticals, microchips, and steel. Earlier that day, however, Treasury Secretary Scott Bessent was pushing for a plan to begin with a 2.5% tariff on all goods and gradually increase them, according to the Financial Times, but Trump told reporters he would reject that plan, saying “that would not be acceptable to me,” saying tariffs needed to be “much, much bigger.”
Leavitt did not specify if there will be any exemptions or if the administration is moving forward with the original plan to issue blanket tariffs on all goods imported from the three countries.
During his first term, Trump used the threat of tariffs as a bargaining chip with several countries, including China.
Gas, food, and alcohol prices are expected to rise when the tariffs against Canada and Mexico begin, threatening to undermine a key promise Trump made on the campaign trail to bring down the price of consumer goods.
Here are some of the items imported from Canada and Mexico that could be affected.
Canada
Canada is the U.S.’s second-largest trade partner, including being its largest export partner and third-largest import partner. Canada accounts for 12.8% of imports into the U.S., according to the Census Bureau.
In 2022, the most recent year that has data available, the U.S. imported $481.2 billion worth of goods from Canada, including crude petroleum, cars, and petroleum gas, according to the Observatory of Economic Complexity. Machinery, materials such as plastics, aluminum, and wood, along with agriculture, among other products, are also major exports from Canada to the U.S., according to Trading Economics.
The tariff on crude petroleum could be especially painful for the U.S., which imported more from Canada than from any other country in 2023. Canada shipped $97 billion worth of crude petroleum to the U.S. that year, compared to $20 billion from Mexico and $55 billion worth from the rest of the world.
Tariffs on these products would likely affect the prices of a wide range of items that use these materials and could also affect fuel prices.
One of the primary drivers behind Trump’s victory over Vice President Kamala Harris earlier this month was a general sense of dissatisfaction with the economy. In particular, voters feel an overwhelming sense that their cost of living is going up and there is little anyone can do to ease their pain.
The cost of housing is particularly painful for families. Though interest rates are beginning to fall, there is still a dearth of new housing, keeping the supply down and costs high.
Canada exports roughly $8 billion in softwood lumber every year, with the U.S. being the single largest purchaser. Cranking up costs for lumber could keep housing starts low, undercutting one of Trump’s primary promises to voters to make their lives more affordable.
Canada is also preparing to install retaliatory tariffs, if needed. Canadian officials are working on a list of dozens of American products that the United States exports to Canada to include, according to CNN.
Mexico
South of the border is the U.S.’s top trading partner, including for imports and exports, according to the Census Bureau.
In 2022, the U.S. imported $493.1 billion worth of goods from Mexico, primarily in the form of cars, car parts, and computers, according to the Observatory of Economic Complexity.
Other major exports include electronic equipment, agriculture, and materials such as plastic, aluminum, rubbers, and glass, among other products, according to Trading Economics.
The price of the No. 1 beer brand in the country, Modelo, will also rise. Constellation Brands, which imports Modelo and Corona beer, could see its costs increase by 16% under Trump’s proposed tariff and would likely have to raise prices by about 4.5%, according to Chris Carey, a Wells Fargo equity analyst. Tequila made in Mexico would also be more expensive.
The southern border between the U.S. and Mexico was at the center of Trump’s pitch for another four years in the White House. His focus in his first term on building a wall to keep illegal immigrants out of the country has been largely replaced by a broader promise to crack down on illegal border crossings and a promise to deport anyone who enters illegally.
U.S. trade with Mexico has gone up across the board since Trump’s first term.
While the countries’ trade-in vehicles and auto parts was always robust, it has soared since 2017, with the U.S. importing $30.43 billion in vehicles in 2017 and $44.76 billion in 2023. Similarly, the U.S. imported roughly $22.6 billion in auto parts in 2017 and $34.3 billion last year.
The U.S. has also nearly doubled its imports of petroleum oil, tractors, and medical instruments from its southern neighbor in that time.
Trump’s introduction of steep tariffs on China in 2018 flipped the script on the country’s trade relationships. China nosedived from making up more than 21% of U.S. imports in 2018 to only slightly outpacing Canada in 2023 when it made up 13.86%. Last year, Mexico made up 15.43% of the U.S.’s imports.
Mexican President Claudia Sheinbaum hinted at retaliatory tariffs if Trump follows through with his threat of 25% tariffs on all imports into the U.S. from Mexico.
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China
While the country’s trade relationship with China is not as significant as the other countries, the U.S. does rely heavily on the East for key electronics such as phones ($55 billion worth imported in 2023) and computers ($40 billion worth in 2023).